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Call for reduction in global steel capacity

Our Bureau

MUMBAI, Sept. 19

THE global nature of the problems facing steel companies and the role that over-capacity and associated over-production were playing came in for close attention at the high-level meeting on steel convened by the OECD early this week. The meeting noted th at in a growing number of instances, the effects of the financial performance of firms had been pronounced, with some companies struggling to survive.

Workers and communities in many steelmaking areas were being affected, as was the ability of a growing number of firms to upgrade and maintain competitive facilities. There were concerns that a further deterioration in market conditions was under way as a result of the softening economic conditions worldwide, OECD said in a release.

Steel trade flows had also been affected, with volatility in these flows rising sharply in recent years. In response, governments were being increasingly asked to intervene, through the introduction of anti-dumping and/or countervailing duty measures. In some instances, other sorts of trade measures had been put into effect or were being contemplated.

While these actions had in many instances been aimed at redressing unfair trade, there was concern that the market remained fundamentally distorted, OECD added.

Identifying uneconomic or inefficient excess steelmaking capacity as the major problem in the sector, industry and Government representatives participating in the meeting concurred that governments can facilitate structural adjustment in a manner which s trengthened market forces and by playing a constructive role in developing and adhering to industry-friendly policies.

Specific attention was paid to measures that could be taken to reduce steelmaking capacity which, in the absence of special conditions or support, would not be viable.

Discussing the need to refrain from Government measures and industry practices that undermine open/free markets and distort international competition in steel, Government officials agreed to pay attention to issues such as subsidies that promote investme nt in new facilities; assistance that sustains failing enterprise; measures that impede fair competition; and anti-competitive behaviour that distorts the market.

Participants in the meeting concurred that efforts need to be made to facilitate the reduction/closure of inefficient capacity. They recognised that there were likely to be differences among governments in defining and identifying such capacity and that the maturity and structure of steel-producing economies differed considerably worldwide; but concurred that a rigorous self-evaluation was necessary.